Education Fund
How much does it cost to attend college in the U.S.? On average, the annual cost of an undergraduate program, including tuition and housing, is as follows:
- Community college: $17,580
- In-state public university: $25,290
- Out-of-state public university: $40,940
- Private non-profit university: $50,900
For professional programs:
- Private law school: $49,095
- In-state public medical school: $36,755
- Out-of-state public medical school: $60,802
- Private medical school: $60,474
If you multiply the annual costs by four, you'll get the total expense for four years of undergraduate or medical school. For a student pursuing both an in-state undergraduate degree and medical school, the total cost comes to $248,180. Attending an accredited school for eight years could cost at least $445,496, and that’s a conservative estimate. Due to the pandemic, many schools are facing revenue challenges, which will likely drive tuition costs even higher.
According to statistics, 70% of American college students rely on student loans, and 1 in 4 working adults is still paying them off. Data from the U.S. Department of Education shows that the average student loan debt is $37,000, with an average monthly payment of $393. Interest rates for student loans range from 5% to 10%, with some reaching as high as 13%. Alarmingly, one-quarter of borrowers have yet to pay off their loans, which often grow like snowballs, leaving many people burdened with student debt for most of their lives.
529 Plan
The 529 education savings plan is a tax-advantaged account designed to help investors save for future educational expenses. Named after Section 529 of the Internal Revenue Code, enacted in 1996, these plans are available in every U.S. state and are typically managed by state agencies or large financial institutions.
When you invest in the 529 plan, your earnings grow tax-free, and you aren’t required to withdraw portions for tax purposes. All contributions grow through compound interest, and if the funds are used for qualified educational expenses—such as tuition, mandatory fees, or books—they remain tax-free.
However, if you use the funds for non-educational purposes, you'll face federal income taxes on the earnings, plus a 10% penalty. You may also need to repay any tax benefits you received for investing in the plan.
The 529 plan can cover a wide range of educational expenses, including tuition, books, school-required electronics, room and board, and even off-campus housing. It's important, though, to be aware of what the plan doesn’t cover.
In addition to the 529 plan, many parents choose to purchase a savings-oriented life insurance policy when their child is born. Due to the child's young age, premiums are typically lower, allowing for high coverage at an affordable price. By the time the child reaches college age, around 19, the cash value of the policy will have grown significantly. Parents can then withdraw these funds to cover college costs without the restrictions of the 529 plan, and the money remains tax-free. Once withdrawals cease, the policy continues to grow in cash value, offering long-term financial benefits.
